The Brent Crude Oil price on Thursday touched a near three-year high at $68.27 per barrel supported by unrest in Iran raising concern about risks to supplies, cold weather in the United States boosting demand and OPEC-led output cuts, Reuters reported. Analysts are pegging that it will not take crude oil price to touch $70 per barrel as this amount is required for Saudi Arabia to break-even to achieve zero deficit in 2017, according to International Monetary Fund.
Here is why Brent crude oil price has been rising:
1. On Tuesday, the Brent crude oil price jumped 25 cents up to $67.12 per barrel as anti-government protesters demonstrated in Iran on Sunday in defiance of a warning by authorities of a crackdown, extending for a fourth day.
2. On December 12, the Brent crude oil price jumped up by 0.9% after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market that was already tightening due to OPEC-led production cuts. Forties North Sea, which delivers the crude oil, is likely to be shut for weeks to carry out repairs to an onshore section of the line. The New York blast was also the reason behind the jump in the oil prices.
3. OPEC and non-members led by Russia decided to extend cuts in oil output until the end of 2018 from March 2018 earlier, as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. The producers are currently cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost the price.
4. Fears of trade union strikes in Africa’s largest oil exporter also led to a jump in oil prices. One of Nigeria’s main oil unions threatened to go on strike from December 18 over what it said was a “mass sacking of workers.” The country is Africa’s top oil exporter.
5. The Iraq-Kurdistan conflict also led to the surge in crude oil prices. The conflict began shortly after the Iraqi Kurdistan referendum in 2017 held on September 25. The diplomatic crisis between the Iraqi Government and the Kurdistan Regional Government (KRG) escalated into a conflict, which resulted in the Battle of Kirkuk (2017). The conflict led to the Iraqi Kurds’ consequential loss of Kirkuk’s oilfields as their main source of revenue.
6. In November it was reported that Saudi Arabia planned to cut crude exports by 120,000 barrels per day (bpd) in December from November, reducing allocations to all regions, which led to jump in oil prices. The reported corruption crackdown in Saudi Arabia also led to fears of destabilisation in the region, making the crude oil price surge.